Which option do I chose for self-employment tax for clergy?

[navyross01]

I'm having trouble knowing which option to select for self-employment tax for clergy. I receive mainly housing allowance from my employer. They withheld money throughout the year from my housing allowance for "self-employment taxes." I just don't know which of the options to select:

1. Pay self-employment tax on wages only

2. Social Security and Medicare taxes have been withheld

3. Pay self-employment tax on housing allowance only

4. Pay self-employment tax on wages and housing allowance 

Option 5 doesn't apply to me.

[DianeW]

You should select number 4. Pay self-employment tax on wages and housing allowance.  It is assumed that as a clergy employee, the employer is not withholding social security or medicare tax on any part of your income.

If you receive a W2, which includes your housing allowance then this is the correct selection.  If you have no wages in box 1 then you can put $1(one dollar) so that the software can understand the information.  A zero for wages will cause complications for E-file.

Review your W2 entry and use the images attached to assist, click to enlarge and view.

1. Sign into your TurboTax Account
2. Select Federal, in the black navigation bar on left
3. In the search box, upper right, type w2 > jump to w2
4. Continue to view your entries.

[navyross01]

So boxes 4 and 6 are empty on my W-2. However, according to our payroll person, he said the amount in box 2 was taken out for social security throughout the year for my housing allowance. Does that even make sense? If so, does that mean I've already paid that? It seems like all the other forums on this type of question show that number 4 is the correct response. I just want to make sure as the amount changes dramatically when I select different options. The only other response I think might be appropriate is to pay self-employment tax on wages only.

[DianeW]

They paid this as federal withholding to help lighten your burden at tax time.  Enter the box 2 amount in box 2 of your W2.  Many churches do this for their pastors.  The can only use the category of federal withholding because they do not participate in social security and medicare, but they know you have to pay it.

[mkdarby]

Based on what you are saying, and it applies to my situation, which box should I check on this screen?

[jrichert3]

In what situation should someone choose option 1 "pay self-employment tax on wages only" ? I am wondering why this option would even be listed

[DianeW777]

Retired ministers. If you are a retired minister, you can exclude from your gross income the rental value of a home (plus utilities) furnished to you by your church as a part of your pay for past services, or the part of your pension that was designated as a rental allowance.

However, if they did receive compensation for ministerial duties, such as evangelist services, they would still be responsible for self-employment tax on their wages.

• IRS Publication 517

[agrace1]

@DianeW777 So in the scenario where the minister receives wages of for example, $6,000, and has housing allowance of $1,000 used to pay for their mortgage and utilities, would you still select option #4 to pay SE tax on wages & housing allowance? Or would you only pay SE taxes on wages?

Essentially by choosing option #4, it's like saying that they received $7,000 for the year even though they only received $6K in cash. Just want to make sure I'm understanding correctly! Thanks!

[DianeW777]

Yes.  You definitely select  'Pay SE tax on wages & housing allowance.' The housing allowance is not taxed for personal income tax purposes, however, if you are not retired, then you must include the housing allowance when determining the self-employment tax.

You are understanding this tax matter for clergy correctly.

[Revsim75]

This would be the scenario if you made estimated quarterly SE tax payments.

[KrisD15]

To clarify, do you have a tax question we can help you with? 

[lockwoodhrl18]

Hi! I have a follow up question: my church pays an amount towards SE Tax which is in box 14 (other). Does this mean I've already paid some of the SE tax and therefore shouldn't select SE Tax for both wages and Housing, but one or the other?

[DianeW777]

Yes, you still select to pay self employment tax on wages and housing.  If your church did pay towards your self employment taxes it should be in Box 4 as federal withholding.  Box 14 should be used for the housing allowance so be sure of what you believe is true by checking with your church.  If the amounts are correct, they need to send in a corrected W-2 for federal withholding.  This is not a new practice.

• Instructions Form W-2C

Once you are clear on what should be in Box 4, and the church corrects the W-2, you can file your return with the correct figures before they actually issue you the form.

@lockwoodhrl18